How Bitcoin Mining Works

You may envision coins being dug out from the underground when hearing about Bitcoin mining. It may be similar to gold mining which is underground except that the bitcoins exists in the design of the protocol, and aren’t brought in the light. About 21 million bitcoins exist at the same point as specified by the bitcoin protocol and the work of a miner is to bring them out into the light. These miners get them as a reward for developing the blocks and including them into the blockchain.

Node

The node is nothing but a powerful computer which has the ability to run the bitcoin software by participating in the relay information. You have to download the bitcoin software which is free and leave a particular port open. One of the nodes send information to a few nodes it knows, and in turn, those nodes will relay the necessary information to rest of the nodes. Some of them are known as the mining nodes as they group the outstanding transactions in the blocks and add them accordingly to the blockchain. Solving a complex mathematical puzzle which is a part of the bitcoin program including the answer in the block. The puzzle to be solved is to find a number which when combined with the data passing through a hash function producing a result within a specific range.

Solve the puzzle

So the question arises, how to find this number? The output is hard to predict because of the hash function.The bitcoin miners guess the number and consequently affix the hash function to the combination including data in the block. The miner who has got the resulting hash is declared victorious. The member who has won receives a new bitcoin.

Economics & difficulty

There are various mining nodes who are competing for the reward of 12.5 bitcoins that is worth of almost $200,000. It is the question of the computing power and a little bit of luck. The price of the mining node is considerable, not because of the hardware itself, but vast amounts of electricity which these processors consume. As the number of bitcoins which are awarded for the puzzle decreases and halves every four years the latest being 12.5. The value of bitcoin relative to the price of both hardware and electricity can may partially compensate the reduction which is not a certainty. Apart from that, the calculation difficulty is frequently adjusted, and it takes approximately ten minutes to process a block. It is a time when the bitcoin developers think is necessary for a steady diminishing flow of brand new coins